IR35 is a piece of law which requires that individuals providing services via their own companies are classified as 'directly employed' for the purpose of calculating income tax and national insurance.
The case was brought by Lisa Fernley, the sole shareholder and director of Lime-IT. In April 2002, her company contracted with the Executive Recruitment Services (ERS), an agent providing assistance to 'end- users.' The end-user named in the contract was Marconi, which would receive PC desktop support from Lime-IT.
When the contract was sent to the Inland Revenue for confirmation, Fernley was told that it was "caught" by IR35 and therefore she would be considered as a Marconi employee for tax purposes.
The Special Commissioners, however, found that the contract was not covered by IR35, after taking into account the following:
There was a contract between Lime-IT and ERS and another between ERS and Marconi;
The contract provided for a standard rate and an overtime rate;
Payment for work carried out was at an hourly rate without sick or holiday pay;
Work was also carried out by the company for four other clients;
Fernley paid for any travel between Marconi sites; and
Fernley was not integrated into Marconi's workforce and her security pass indicated her as a contractor.
The decision is one of the only three Special Commissioners' judgements on the IR35 legislation, although the Special Commissioners' decisions do not constitute precedents.
